On Tuesday, Bell confirmed the auto-enrolment earnings trigger will remain at its current level of £10,000 between 1 April 2025 and 30 April 2026.
Despite most being “unsurprised” by his decision, experts have criticised it, with one saying it is a “missed opportunity” to address the issue of people not having enough saved for retirement.
Bell’s decision will ensure businesses do not face another extra cost following the rise in the living wage and increase in employer national insurance contributions.
But with continued discussion over the future of the triple lock for state pensions – guaranteed for the remainder of this Parliament – and concerns that people are not saving enough for their pensions, some said the Government must do more.
He also argued the Government’s decision puts the onus on individuals to ensure they are saving enough for their future.
“Small increases now, even as little as 5 per cent, could be the difference between a retirement of necessity and one of choice and comfort.”
Rachel Vahey, head of public policy at AJ Bell, said a thorough review of whether people in the UK are saving enough for retirement is needed urgently.
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“Instead, we need a thorough review of whether people in the UK are saving enough for retirement.
“It needs to pick this back up again, along with plans to put into action the changes already agreed to lower the auto-enrolment minimum age to 18 and count contributions on the first pound of salary upwards.”
“If we are to help people enjoy a decent income in retirement, it’s something the Government is going to need to get to grips with sooner rather than later.”
She said: “As wages continue to go up, more people could be missing out on valuable pension contributions on the part of their salary above £50,270.”
“We encourage employers to support their employees from minority backgrounds to make informed decisions about their retirement savings and raise awareness of Sharia-compliant investment options.”
‘This is likely to prove damaging for this end of the jobs market’
He said that recent Budget changes, including the increase in the minimum wage for low earners, the rise in employer NICs, and the reduction in the threshold at which these apply, have hit business owners up and down the country hard.
“This is sure to see more people hit the trigger level for pensions auto-enrollment, piling on costs for companies.
The AE trigger was set at £10,000 annually in the 2014-15 tax year and has remained frozen since then. The lower and upper thresholds have been frozen for five years.
Mr Hollands said he suspected the auto-enrolment trigger would be frozen due to the already frozen income tax personal allowance thresholds.
Millions not saving enough for retirement
In September last year the Institute for Fiscal Studies think tank estimated between 30-40 per cent of private sector employees – around 5-7 million people, were on track to fall short of standard retirement benchmarks.
There have also been warnings that the state pension age would have to rise to 71 by 2050 if the triple lock mechanism remains due to the cost.
The state pension is at present 66 for men and women, rising to 67 from 2028 and a further planned to increase to 68 in 2044, although this may change after review.
The state pension bill is estimated to grow to around £148bn by 2027/28 from £110bn in 2022/23, according to the Office for Budget Responsibility. Under the current policy, until 2050 it is estimated to grow to around £200bn, according to the Institute of Fiscal Studies (IFS).
‘The trigger should be scrapped altogether’
In her opinion, anyone earning below £10,000 should be just as entitled to receive pension contributions from their employer as those who earn more than that.
“Legislation was passed to ensure pension contributions are made from pound zero, rather than from the lower earnings limit of band earnings, but the Government has not yet put regulations in place to start this happening.
“Of course, those not auto-enrolled can, in theory, opt in, but the whole point of auto-enrolment is that they should not need to and therefore they automatically get money in their pension from their employer each month.”
He said: “The point at which workers have to be enrolled in a pension has been frozen for many years.
“Whilst this is a sensible approach, more fundamental reform is needed to make sure that millions of people who are currently saving into a workplace pension are paying a realistic amount.
The DWP has been contacted for comment.
How auto-enrolment works
Auto-enrolment simply means your employer will set up a pension for you without you needing to ask to join.
This will happen if you’re a UK resident and:
usually work in the UK are between the age of 22 and 66 – the state pension age earn more than £10,000 a year or the weekly and monthly ‘earnings thresholds’ don’t already have a suitable workplace pensionThis includes if you’re on a short-term or zero-hours contract, away on maternity, paternity, shared parental, adoption or carer’s leave or an agency pays your wages.
If you’re self-employed or the only director and employee of a limited company, auto-enrolment doesn’t affect you.
The earnings thresholds for auto-enrolment are:
£192 a week £833 a month £10,000 a yearIf you earn more than the threshold, your employer should set up a workplace pension for you.
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